Some brand owners have applied for new gTLDs with the expectation of operating them solely for their own benefit, but can they insist on having exclusive access? Flip Petillion of Crowell & Moring has the answers.
Industries worldwide wonder whether a brand owner can exclusively control a branded top-level domain (TLD) and whether a registry operating a truly generic TLD (gTLD) can exclude brand owners from the second level. The answer to these questions seems affirmative, as this article will explain.
As TLDs were previously fewer in number, applicants were invited to compete to obtain the exclusive control of a string. If, during the application process one or more parties had reason to believe there were grounds for objecting to an application, they could initiate one of the so-called objection procedures administered by the World Intellectual Property Organization, the International Chamber of Commerce and the International Center for Dispute Resolution.
These objection procedures related to legal rights (ie, trademarks), community rights and string contention. A community priority evaluation (to grant priority to one applicant over another) was another way to resolve any remaining competition between applicants for the same string. If, ultimately, competition for the string remained and applicants could not resolve the situation through negotiations, ICANN offered applicants the chance to participate in an auction process, allowing only one applicant to become the TLD’s operator.
Once all the TLDs have been delegated, a different kind of competition becomes obvious. Indeed, the ultimate objective of the new programme for gTLDs is to foster diversity and to create significant potential for new uses that will benefit internet users around the world. ICANN has a statutory obligation to promote this competition and is expected to refrain from any action that may endanger competition.
In order to compete successfully, any business—particularly one operating in a space that is as dynamic and rapidly changing as the internet—must develop a clear, distinctive and differentiated identity that sticks in the minds of consumers and sets it apart from its competitors. This is important not only to the business itself, but also to the customers who use and rely on it. Building up a strong distinctive brand in a highly competitive environment has been crucial to the success of entrepreneurs who are active online.
In this context, access to new gTLDs creates a new and significant opportunity for brand owners to further raise their profiles and offer clearly defined and easy-to-locate services to consumers. Allowing companies to control their own destinies via access to an appropriate gTLD makes them better competitors and better service providers to their customers.
By contrast, forcing well-established businesses into a single gTLD would result in a profoundly anti-competitive outcome. Either one of the competitors will not have access to its desired gTLD (or to the opportunities it offers) or all companies may end up sharing the same gTLD, reducing differentiation between them and potentially causing customer confusion.
"The brand TLD may become a preferred source for branded products or services, but that does not make the TLD a separate market."
Operators of a branded TLD may be concerned that third parties that own independent trademarks for a sign identical to the TLD would require access to second-level domain names within the brand TLD. However, this should not be an issue.
From an EU anti-competition perspective, exclusive access to a brand TLD becomes problematic only if the TLD operator holds a dominant position in a relevant market and abuses that position. In the US, the exclusion of other brand owners in a TLD would be anti-competitive only if the TLD operator holds market power in a relevant market and has acquired or enhanced that market power by the use of exclusionary conduct.
Separate markets
Successfully applying for a brand TLD does not necessarily affect the market in which the applicant operates. By starting the operation of a brand TLD, the TLD operator will not alter its position or power in the market within which it already operates. It seems unlikely that a brand TLD that remains dedicated to the TLD operator’s brand will constitute a separate market.
The brand TLD may become a preferred source for branded products or services, but that does not make the TLD a separate market. Other TLDs (such as .com, .eu and .net) are reasonably interchangeable and substitutable with brand TLDs. Furthermore, even if the brand TLD were nevertheless to be considered a relevant market, it remains unlikely that exclusionary conduct will be considered abusive or a means to acquire or enhance market power.
A brand TLD operator has several pro-competitive business justifications for restricting access, including the fact that another party’s use of the TLD would give the impression of affiliation with the TLD operator.
On the other hand, the brand TLD operator must refrain from giving the impression of affiliation with other brand owners that have trademark rights in signs identical, or confusingly similar, to the TLD. Otherwise the TLD operator may face trademark litigation and, in exceptional circumstances, the termination of the operation of the TLD. Outside of court proceedings, such a termination may be ordered in an expert determination following a so-called trademark post-delegation dispute resolution procedure.
Many TLD applicants have tried to obtain exclusive access to a new truly generic TLD; this would give them the authority to decide who may register domain names in their TLD. Some have wanted to keep all domain name registrations for themselves. This operational freedom was envisioned during the development of the new gTLD programme. It was even included in the base contract for new gTLD operators. As a result, new gTLD applicants had the legitimate expectation of being able to operate exclusive access TLDs.
However, the imminent introduction of exclusive access TLDs made several government representatives uncomfortable. A consensus was reached within ICANN’s Governmental Advisory Committee (GAC) that any exclusive registry access granted within truly generic TLDs should be in the public interest. It seems that the ICANN board has accepted the GAC’s advice, but only time will tell how that advice will be implemented.
Is it not in the public interest that a registry operator be allowed to operate an exclusive access TLD in order to diversify the market? What will ICANN do if an applicant who has applied for a new gTLD with the legitimate expectation of operating it solely for its own benefit insists on having exclusive access?
Some truly generic TLDs, such as .bank or .lawyer, refer to highly regulated sectors globally. In the interest of consumer protection and existing regulation, the GAC advised that restrictions apply to such gTLDs. But the list of the gTLDs concerned is long and also includes gTLDs such as .audio, .film and .tour. The ICANN board accepted the GAC’s advice and requires those applicants concerned to adopt specific safeguards in the operation of their TLDs.
Most safeguards require that the TLD operator obtain specific guarantees from domain name registrars. Many of the guarantees relate to compliance with local laws. TLD operators must also be able to handle complaints and consult with local authorities. In addition, TLD operators may commit themselves to the adoption of additional safeguards.
In view of divergent and ever-changing regulatory requirements across the globe, TLD operators may have an interest in adopting stricter safeguards to exclude parties from registering domain names in the gTLD. Without strict safeguards, there is a risk that the handling of complaints will become too complex.
Brand owners that wish to register domain names in strictly regulated TLDs will need to scrutinise the registration requirements, take into account local regulations and also be prepared to address complaints. At the same time, strictly regulated TLDs have the potential to become anchors of trust, and domain names in such TLDs could increase the value of a brand.
Flip Petillion is a partner at Crowell & Moring. He can be contacted at: fpetillion@crowell.com
gTLDs, TLDs, ICANN, domain names, GAC
